Chapter_6_Non-tariff_Barriers

This makes it appear that the government was not

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This makes it appear that the government was not collecting all of the rents in area ‘c’. In 1988, New Zealand announced plans to phase out import quotas as part of trade liberalization, and all quota licenses were eliminated by 1992.
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Import Quotas 4. “Voluntary” Export Restraint The importing country can give authority for implementing the quota to the exporting government. This is often called a “voluntary” export restraint (VER) or a “voluntary” restraint agreement (VRA). In the 1980s the U.S. used this type of arrangement to restrict imports of Japanese automobiles. The Japanese government told each Japanese firm how much it could export to the U.S.
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Import Quotas With VERs, quota rents are earned by foreign producers, making Home welfare: Fall in consumer surplus -(a+b+c+d) Rise in producer surplus +a Net effect on Home welfare: -(b+c+d) This is a higher net loss than with a tariff. Why would an importing country do this? It is typically political—the exporting country is less likely to retaliate since they gain the area ‘c’. This can often avoid a tariff or quota war.
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Import Quotas Costs of Import Quotas in the U.S. The next table presents some estimates of Home deadweight losses and quota rents for some major U.S. quotas in the 1980’s. In all cases except Dairy, the rents were earned by Foreign exporters. Adding up the costs in the table, the total U.S. deadweight loss due to these quotas ranged from $8–$12 billion annually. Quota rents transferred another $7–$17 billion to foreigners. Some, but not all, of these costs are relevant today since many of the quotas are no longer in place.
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Import Quotas
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The Multifibre Arrangement One of the principles of General Agreement on Tariffs and Trade (GATT) was that countries should not use quotas to restrict imports. The MFA was a major exception to that which allowed the industrialized countries to restrict imports of textile and apparel products from the developing countries. The quotas were used to protect their own domestic firms producing those products. Organized under GATT, importing countries could join the MFA and arrange quotas bilaterally or unilaterally.
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The Multifibre Arrangement While the amount of the quotas was occasionally revised upward, they did not keep up with the increasing ability of new supplying countries to sell. Under the Uruguay round of WTO, developing countries were able to negotiate an end to this system of import quotas. Given that China was a large supplier of textiles, the expiration of the MFA meant that China could export as much as it wanted – or so it thought. Some developing countries and large producers in importing countries were concerned with the potential of Chinese exports on their economies.
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The Multifibre Arrangement Growth in Exports from China Immediately after January 1, 2005, exports of textiles and apparel from China grew rapidly.
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